ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Chapter 16, Problem 14P
To determine

To find: Theopportunity cost of capital and the project that can be considered.

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Which statement(s) is (are) TRUE in the context of urban development? Group of answer choices The per capita environmental footprint (impact) of living in ‘high density’ areas is typically higher than living in ‘low density’ areas when all the infrastructure (electricity networks, water, gas, road, etc) are considered. Transportation subsidies may promote higher than optimal commuting distances. Public transport subsidies are an effective way to tackle urban sprawl. The key reason for imposing developer charges (or development impact fees) is to offset the environmental impact costs of the development.
Suppose you are an economist at the US Army Corps of Engineers. The Corps is considering whether to build a dam (such as the Kinzua Dam) to prevent flooding on a major river. The Corps asks you to conduct a cost benefit analysis of the project. The dam is expected to be in service for over 100 years, so you can assume the time horizon is essentially infinite. You have the following information: Estimated costs: • $1 billion in construction costs in the first year $10 million in maintenance costs every year, forever Estimated benefits: $20 million in property damage avoided every year, forever • 3 flooding deaths prevented every year, forever 1a. Assume r-3% and the value of a statistical life is $10 million. Calculate the present value of net benefits for the dam. Do you recommend that the project be approved? 1b. Assume the VSL is still $10 million. How big would the discount rate have to be to change your recommendation of the dam's approval? (In other words, find r such that the…
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